# "Labor theory of value" on @Wikipedia: "Labor theory of value > [!caution] This page contained a drawing which was not converted. # Theoretical economics The labor theory of value is a heterodox economic theory of value that argues that the economic value of a good or service is determined by the total amount of socially necessary labor required to produce it, rather than by the use or pleasure its owner gets from it. At present this concept is usually associated with Marxian economics, although it is also used in the theories of earlier liberal economists such as Adam Smith and David Ricardo and later also in anarchist economics. Definitions of value and labor When speaking in terms of a labor theory of value, value, without any qualifying adjective should theoretically refer to the amount of labor necessary to the production of a marketable commodity, including the labor necessary to the development of any real capital employed in the production. Both David Ricardo and Karl Marx attempted to quantify and embody all labor components in order to develop a theory of the real price, or natural price of a commodity. The labor theory of value, as presented by Adam Smith, however, did not require the quantification of all past labor, nor did it deal with the labor needed to create the tools that might be employed in the production of a commodity. The Smith theory of value was very similar to the later utility theories in that Smith proclaimed that a commodity was worth whatever labor it would command in others or whatever labor it would "save" the self, or both. But this "value" is subject to supply and demand at a particular time. The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What every thing is really worth to the man who has acquired it, and who wants to dispose of it or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people. Smith's theory of price has nothing to do with the past labor spent in the production of a commodity. It speaks only of the labor that can be "commanded" or "saved" at present. If there is no use for a buggy whip then the item is economically worthless in trade or in use, regardless of all the labor spent in its creation. Distinctions of economically pertinent labor Value "in use" is the usefulness of this commodity, its utility. A classical paradox often comes up when considering this type of value. In the words of Adam Smith: The word VALUE, it is to be observed, has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called 'value in use;' the other, 'value in exchange.' The things which have the greatest value in use have frequently little or no value in exchange; and on the contrary, those which have the greatest value in exchange have frequently little or no value in use. Nothing is more useful than water: but it will purchase scarce any thing; scarce any thing can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it. Value "in exchange" is the relative proportion with which this commodity exchanges for another commodity. It is relative to labor as explained by Adam Smith: The value of any commodity,... to the person who possesses it, and who means not to use or consume it himself, but to exchange it for other commodities, is equal to the quantity of labour which it enables him to purchase or command. Labour, therefore, is the real measure of the exchangeable value of all commodities. Value is the labor embodied in a commodity under a given structure of production. Marx defined the value of the commodity by the third definition. In his terms, value is the 'socially necessary abstract labor' embodied in a commodity. To Ricardo and other classical economists, this definition serves as a measure of "real cost", "absolute value", or a "measure of value" invariable under changes in distribution and technology. Ricardo, other classical economists, and Marx began their expositions with the assumption that value in exchange was equal to or proportional to this labor value. They thought this was a good assumption from which to explore the dynamics of development in capitalist societies. Other supporters of the labor theory of value used the word "value" in the second sense, to represent "exchange value". LTV and the labor process Since the term value is understood in the LTV as denoting something created by labor, and its "magnitude" as something proportional to the quantity of labor performed, it is important to explain how the labor process both preserves value and adds new value in the commodities it creates. The value of a commodity increases in proportion to the duration and intensity of labor performed on average for its production. Part of what the LTV means by "socially necessary" is that the value only increases in proportion to this labor as it is performed with average skill and average productivity. So though workers may labor with greater skill or more productivity than others, these more skillful and more productive workers thus produce more value through the production of greater quantities of the finished commodity. Each unit still bears the same value as all the others of the same class of commodity. By working sloppily, unskilled workers may drag down the average skill of labor, thus increasing the average labor time necessary for the production of each unit commodity. But these unskillful workers cannot hope to sell the result of their labor process at a higher price simply because they have spent more time than other workers producing the same kind of commodities. However, production not only involves labor, but also certain means of labor: tools, materials, power plants and so on. These means of labor—also known as means of production—are often the product of another labor process as well. So the labor process inevitably involves these means of production that already enter the process with a certain amount of value. Labor also requires other means of production that are not produced with labor and therefore bear no value: such as sunlight, air, uncultivated land, unextracted minerals, etc. While useful, even crucial to the production process, these bring no value to that process. In terms of means of production resulting from another labor process, LTV treats the magnitude of value of these produced means of production as constant throughout the labor process. Due to the constancy of their value, these means of production are referred to, in this light, as constant capital. Consider for example workers who take coffee beans, use a roaster to roast them, and then use a brewer to brew and dispense a fresh cup of coffee. In performing this labor, these workers add value to the coffee beans and water that comprise the material ingredients of a cup of coffee. The worker also transfers the value of constant capital—the value of the beans; some specific depreciated value of the roaster and the brewer; and the value of the cup—to the value of the final cup of coffee. Again, on average the worker can transfer no more than the value of these means of labor previously possessed to the finished cup of coffee So the value of coffee produced in a day equals the sum of both the value of the means of labor—this constant capital—and the value newly added by the worker in proportion to the duration and intensity of their work." [https://en.wikipedia.org/wiki/Labor_theory_of_value?wprov=sfti1](https://en.wikipedia.org/wiki/Labor_theory_of_value?wprov=sfti1) Clipped from [Labor theory of value - Wikipedia](https://en.wikipedia.org/wiki/Labor_theory_of_value) at 2024-11-15.